By Herbert Lash
NEW YORK (Reuters) - A slide in biotech stocks pulled Wall Street and a measure of global equities lower on Friday despite a solid U.S. jobs report that weakened the dollar on views that the Federal Reserve will keep scaling back its stimulus.
The U.S. bond market, surprisingly, rallied, particularly five-year Treasury notes, which had been weak lately on fears the Fed could raise interest rates earlier than anticipated.
The FTSEurofirst 300 index of European shares touched a peak last seen in 2008 on the U.S. jobs data and closed higher, for a ninth straight gain and marking the third consecutive week of higher closes.
But stocks on Wall Street retreated after stabilizing earlier in the week as momentum stocks such as biotechs fell for a second straight session. The Nasdaq biotech index lost 4.01 percent, and the Nasdaq composite fell 2.6 percent in its worse single-day loss in two months.
The decline pulled down U.S. stocks and global equities.
"You've got some big names in there. There is a high correlation inside of those groups," said Keith Bliss, senior vice president at Cuttone & Co in New York. "Managers tend to trade the entire group as opposed to individual names. So that of course, is hitting the Nasdaq and everybody else."
Equities had opened higher on optimism spurred by the U.S. nonfarm payrolls report, which a gain of 192,000 jobs in March, just shy of the 200,000 forecast, after rising 197,000 in February. The unemployment rate was unchanged at 6.7 percent.
With a solid pace of hiring for a second month, the U.S. economy appears to be recovering from a winter slowdown.
A smaller survey of households, from which the unemployment rate is derived, showed a much bigger surge in employment. That jump was met by a rise in the number of people entering the labor force, a show of confidence in the U.S. job market.
The percentage of working-age Americans with a job reached its highest level since the summer of 2009.
"I'm surprised by the overall weakness today, but since it is concentrated in names that have been weak, I think it is just a continuation of that. I'm not concerned about this spilling over to the broader market," said David Joy, chief market strategist at Ameriprise Financial in Boston, where he helps oversee $703 billion in assets under management.
"We've been in a trading range, finding resistance at record levels, so this isn't cause for alarm. The data is getting stronger, which suggests we have an opportunity to move higher with participation from other groups," Joy said.
The S&P 500 hit a record high before retreating. MSCI's all-country world stock index fell 0.45 percent.
The Dow Jones industrial average fell 159.84 points, or 0.96 percent, to 16,412.71. The S&P 500 lost 23.68 points, or 1.25 percent, to 1,865.09, and the Nasdaq Composite dropped 110.014 points, or 2.6 percent, to 4,127.726.
For the week, the Dow rose 0.6 percent, the S&P gained 0.4 percent, and the Nasdaq fell 0.7 percent.
Bond prices rose, with the five-year up 13/32 in price to yield 1.7022 percent. The benchmark 10-year U.S. Treasury note rose 17/32 in price to yield 2.7261 percent.
"This (jobs) number doesn't give any reason to move up the Fed timing of rate hikes, which is what was feared most," said John Briggs, U.S. rates strategist at RBS in Stamford, Connecticut.
The FTSEurofirst 300 index closed up 0.56 percent at 1,352.78.
The dollar was choppy against the euro and declined against other major currencies despite the U.S. jobs gains.
"It's a Goldilocks report, not too warm and not too cold, and puts pressure on the next report in May to be good," Anthony Valeri, investment strategist at LPL Financial in San Diego, said. "It doesn't change the pace of tapering and shows the economy is still on track."
The greenback was up 0.14 percent against the euro at $1.3695. It fell 0.66 percent to 103.22 against the Japanese yen after hitting a session high of 104.12 yen in trading immediately after the employment report.
Brent crude rose above $106 a barrel as expectations of a deal to reopen vital Libyan oil ports were offset by doubts that a lasting resolution was imminent.
Brent crude settled up 57 cents at $106.15 a barrel. U.S. crude, or West Texas Intermediate, rose 85 cents to settle at $101.14 a barrel.
(Reporting by Herbert Lash; additional reporting by Marc Jones in London; Editing by Bernadette Baum, Meredith Mazzilli, Dan Grebler and Leslie Adler)